1.  The short-run Phillips Curve is a curve that shows the relat.docx

1.  

The short-run Phillips Curve is a curve that shows the relationship between the inflation rate and the pure interest rate when the natural rate of unemployment and the expected rate of inflation remain constant.

True

False

2.  

At higher rates of inflation, unemployment is lower in the short-run Phillips Curve; in the long run, however, inflation has no effect on unemployment.

True

False.  

3.The Federal Funds Market is actually monitored and manipulated by the Federal Reserve, but individual investors can enter the market and borrow funds if desired.

True

False

4.  

One of the three main tools of the Federal Reserve is fiscal policy.

True

False

5.  

The Federal Reserve's Reserve Requirement ratio can reduce the monetary base and thus the money supply.

True

False

6.  

If the Federal Reserve wants to reduce interest rates and increase the velocity of money, it can utilize the open market operations tool by selling government bonds to member banks.

True

False

7. 

The use of money as a medium of exchange represents the most important service that money renders.

True

False

8. 

Keynes advocated government deficit spending during recessions, especially if full employment was not yet reached.

True

False

9. 

ommercial banks and credit unions can create money and credit.

True

False

10. M1 includes currency, checkable deposits, and traveler's checks, but M2 does not include M1 in any way. 

11. 

The imposition of a tariff on foreign goods is more likely to decrease producer surplus of the domestic firms competing with those foreign firms on whom the tariff is imposed.

True

False

12. 

When an American purchases a German good or invests in Germany, Euros currency is supplied and U.S. dollars are demanded.

True

False

13. 

The main goal of the Federal Reserve is the unemployment rate.

True

False


14. 

If the economy is in long run economic equilibrium, at potential GDP, and full employment has been reached as well, if there is an outward shift in aggregate demand, we can expect damaging inflation to start to occur and the government to seek contractionary fiscal and monetary options.

True

False


15. 

If the MPC is .9, and government purchases increase by $6,000, real GDP demanded will:

a.

decrease by $60,000

b.

decrease by $6,000

c.

increase by $60,000

d.

increase by $6,000

e.

increase by $5,000


17. 

Fiscal policy consists of the executive branch's decisions to tax and spend.  If the economy is in an expansionary mode just coming out of a recession, in regards to aggregate demand and aggregate supply, we can assume that a tax hike will lead to

a.

the economy expanding even more as a result.

b.

aggregate demand and supply to shift inward.

c.

aggregate supply to shift inward.

d.

aggregate demand to shift inward.

e.

no changes will occur.


18. 

The natural rate of unemployment is

a.

when the economy is at potential GDP.

b.

when the unemployment rate is at full employment. 

.

1. 1.

The short-run Phillips Curve is a curve that shows the
relationship between the inflation rate and the pure interest rate
when the natural rate of unemployment and the expected rate of
inflation remain constant.

True

False

2.

At higher rates of inflation, unemployment is lower in the short-
run Phillips Curve; in the long run, however, inflation has no
effect on unemployment.

True

False.

3.The Federal Funds Market is actually monitored and
manipulated by the Federal Reserve, but individual investors
can enter the market and borrow funds if desired.

True

False

4.

One of the three main tools of the Federal Reserve is fiscal
policy.

True

2. False

5.

The Federal Reserve's Reserve Requirement ratio can reduce the
monetary base and thus the money supply.

True

False

6.

If the Federal Reserve wants to reduce interest rates and
increase the velocity of money, it can utilize the open market
operations tool by selling government bonds to member banks.

True

False

7.

The use of money as a medium of exchange represents the most
important service that money renders.

True

False

8.

Keynes advocated government deficit spending during
recessions, especially if full employment was not yet reached.

3. True

False

9.

ommercial banks and credit unions can create money and credit.

True

False

10. M1 includes currency, checkable deposits, and traveler's
checks, but M2 does not include M1 in any way.

11.

The imposition of a tariff on foreign goods is more likely to
decrease producer surplus of the domestic firms competing with
those foreign firms on whom the tariff is imposed.

True

False

12.

When an American purchases a German good or invests in
Germany, Euros currency is supplied and U.S. dollars are
demanded.

True

False

13.

4. The main goal of the Federal Reserve is the unemployment rate.

True

False


14.

If the economy is in long run economic equilibrium, at potential
GDP, and full employment has been reached as well, if there is
an outward shift in aggregate demand, we can expect damaging
inflation to start to occur and the government to seek
contractionary fiscal and monetary options.

True

False


15.

If the MPC is .9, and government purchases increase by $6,000,
real GDP demanded will:

a.

decrease by $60,000

b.

decrease by $6,000

c.

5. increase by $60,000

d.

increase by $6,000

e.

increase by $5,000


17.

Fiscal policy consists of the executive branch's decisions to tax
and spend. If the economy is in an expansionary mode just
coming out of a recession, in regards to aggregate demand and
aggregate supply, we can assume that a tax hike will lead to

a.

the economy expanding even more as a result.

b.

aggregate demand and supply to shift inward.

c.

aggregate supply to shift inward.

d.

aggregate demand to shift inward.

e.

6. no changes will occur.


18.

The natural rate of unemployment is

a.

when the economy is at potential GDP.

b.

when the unemployment rate is at full employment.

c.

when there is no cyclical unemployment.

d.

all of the above.

e.

only a and b.


19.

According to Keynes,

a.

aggregate demand is most important to achieve potential output.

7. b.

the government should not utilize fiscal policy to influence
economic activity.

c.

government spending should decrease during recessions.

d.

aggregate supply is most important to achieve potential output.


20.

A government tariff will result in

a.

deadweight losses.

b.

higher prices for the goods imposed by a tariff.

c.

less output for that good.

d.

reduced consumer surplus.

e.

8. all of the above.


21.

During a recession, the government can help the economy by

a.

decreasing taxes.

b.

buying government bonds back from member banks.

c.

increasing government spending.

d.

a and b only.

e.

b and c only.

f.

a, b, and c.


22.

The 1970's period of stagflation involved

9. a.

relatively high unemployment.

b.

relatively high inflation.

c.

relatively low economic growth.

d.

high economic expansion.

e.

a, b, and c.


23.

The proliferation of trade in recent decades has led to

a.

increased competition.

b.

deflationary pressures on prices on goods and services.

c.

less developed nations to improve their inhabitants' standards of

10. living.

d.

once socialist nations to become more market oriented.

e.

all of the above.


24.

If the economy is in a recession due to aggregate demand
shifting inward and the economy is contracting, if aggregate
demand doesn't improve, we can expect the short-run aggregate
supply curve to

a.

shift inward.

b.

shift outward but real GDP will be unchanged.

c.

will remain unchanged.

d.

become the long-run aggregate supply curve.


25.

11. In the long run, the price level is determined by

a.

the aggregate demand curve being perfectly vertical.

b.

the short-run aggregate supply curve and long-run aggregate
supply curve being the same.

c.

short-run aggregate supply curve.

d.

the aggregate demand curve